IEBE TENTAMEN SAMENVATTING
1 What is economics?
Samuelson: science? Yes
- Methods: experimental, modeling, hypothesis, simplifying
- Approach: inductive/deductive reasoning
a. Deductive = logic & geometry (general --> specific)
b. Inductive = statistical & empirical (specific --> general)
- Overlapping other social/behavioral sciences: psychology, sociology, history (fields)
= multidisciplinary
--> Schools of thoughts: common perspectives/practices/believs
Sciences:
1. Positive = objective, facts “what is”
2. Normative = subjective “should be”
3. Social = evolving
4. Normal = consensus (within paradigma)
5. Art = applied knowledge, rules, get end (policies solving eco problem)
Limitations of Economic Methodology: POTGPF
1. Post hoc fallacy = inability to perform controlled experiments
(difference economic/physical science)
2. Oversimplification = simplification, for hypothesis/patterns
3. Tyranny of words = confusion by ...
--> 2 different words same thing
--> word applied 2 different things
4. Gestalt psychology = how perceive by theoretical spectacles they wear
(elements/judgement) (oude/jonge vrouw)
5. Probability of error = ‘on average’, with many exemptions
(difference economic/physical science)
6. Fallacy of composition = what holds for individual not necessarily true for society as whole
(vb consuming choice) (rabbit/bird)
, 2 The economy: what is the subject of economics?
! GDP:
- Gross: Total
- Domestic: Country
- Product: Produced goods/services
(per capita = / people * 100)
û Not measure inequality: average (aggregate) income entire population, not realistic picture
within society (ignoring inequality between people)
û No quality of life
ü Indication comparing counties
HDI
ü Quality of life: life expectancy
ü Literacy rates
ü Real GDP (adjusted inflation)
û No rich/poor ratio: unequal society moral/practical downsides
! GINI index/coefficient
ü Measure inequality scale 0 to 1
- 0 = perfect equal
- 1 = high inequality
Capitalism, institutions: (failures)
1. Private property = ownership: possessions choose/exclude/dispose
rights not being secure (weak contracts)
2. Markets = exchange: buyers&sellers/goods&services
not being competitive (no improve quality)
3. Firm = capitalist economy: individual/wages/direct
owned/managed people survive by government (no high-quality goods)
Growth in productivity:
ü Technology: firms competing --> incentive develop techno --> invest goods --> grow firm
ü Specialization: more labor: difference in ability/economies of scale
1 What is economics?
Samuelson: science? Yes
- Methods: experimental, modeling, hypothesis, simplifying
- Approach: inductive/deductive reasoning
a. Deductive = logic & geometry (general --> specific)
b. Inductive = statistical & empirical (specific --> general)
- Overlapping other social/behavioral sciences: psychology, sociology, history (fields)
= multidisciplinary
--> Schools of thoughts: common perspectives/practices/believs
Sciences:
1. Positive = objective, facts “what is”
2. Normative = subjective “should be”
3. Social = evolving
4. Normal = consensus (within paradigma)
5. Art = applied knowledge, rules, get end (policies solving eco problem)
Limitations of Economic Methodology: POTGPF
1. Post hoc fallacy = inability to perform controlled experiments
(difference economic/physical science)
2. Oversimplification = simplification, for hypothesis/patterns
3. Tyranny of words = confusion by ...
--> 2 different words same thing
--> word applied 2 different things
4. Gestalt psychology = how perceive by theoretical spectacles they wear
(elements/judgement) (oude/jonge vrouw)
5. Probability of error = ‘on average’, with many exemptions
(difference economic/physical science)
6. Fallacy of composition = what holds for individual not necessarily true for society as whole
(vb consuming choice) (rabbit/bird)
, 2 The economy: what is the subject of economics?
! GDP:
- Gross: Total
- Domestic: Country
- Product: Produced goods/services
(per capita = / people * 100)
û Not measure inequality: average (aggregate) income entire population, not realistic picture
within society (ignoring inequality between people)
û No quality of life
ü Indication comparing counties
HDI
ü Quality of life: life expectancy
ü Literacy rates
ü Real GDP (adjusted inflation)
û No rich/poor ratio: unequal society moral/practical downsides
! GINI index/coefficient
ü Measure inequality scale 0 to 1
- 0 = perfect equal
- 1 = high inequality
Capitalism, institutions: (failures)
1. Private property = ownership: possessions choose/exclude/dispose
rights not being secure (weak contracts)
2. Markets = exchange: buyers&sellers/goods&services
not being competitive (no improve quality)
3. Firm = capitalist economy: individual/wages/direct
owned/managed people survive by government (no high-quality goods)
Growth in productivity:
ü Technology: firms competing --> incentive develop techno --> invest goods --> grow firm
ü Specialization: more labor: difference in ability/economies of scale
